ForexLive European FX news wrap: Pound a little sluggish as equities sentiment improves
Forex news from the European trading session - 12 October 2018
- Mnuchin: Concerned about weakness of China's currency
- Mnuchin says that US economic fundamentals are strong
- JP Morgan earnings beat add to positive vibes for US equities ahead of the open
- EU's Oettinger says EUR/USD exchange rate gives cause for concern
- UK PM spokesman says May will never agree to backstop that will trap UK in a customs union permanently
- NZ's Robertson says 'not uncomfortable' with currency at the moment
- Eurozone August industrial production +1.0% vs +0.5% m/m expected
- ECB's Draghi says Eurozone economy is in broad-based expansion
- Mnuchin says that markets are not efficient, experiencing a "normal correction"
- Australia's Frydenberg: Haven't yet seen large macro impact from trade spat
- UK's Hammond: Brexit backstop must be temporary
- UK ministers reportedly said to have expressed concern on how long the UK remains in the customs union
- Germany September final CPI +0.4% vs +0.4% m/m prelim
- CAD leads, GBP and CHF lag on the day
- European equities mostly higher, but off the highs at the open
- US 10-year yields up 2.3 bps to 3.172%
- Gold down 0.21% to $1,221.55
- WTI up 0.87% to $71.59
- Bitcoin flat at $6,203
It was a session of rebound for equities but the currencies market remains unperturbed for the most part. Asian equities started the day lower but ended it near the highs as market sentiment started to turn the corner. That saw European equities up on the day as well with US equity futures also rising alongside risk assets such as oil.
Oil's jump early in the session helped to put a bid in the Canadian dollar and that is what's helping to underpin the loonie on the day as we head into US trading. USD/CAD started the session around 1.3030 before moving to a low of 1.3013 and then testing levels near the 1.3000 handle before trading now around 1.3010.
But the notable currency movement in the session belonged to the pound as cable rose to a three-week high of 1.3258 early on, only to give back those gains as reports continued to emerge that the UK wants to opt out of an open-ended Brexit backstop agreement. That sets up a conflict with the EU as they want to leave it as an open-ended period.
The pound fell thereafter to a low of 1.3207 and continues to trade near the lows between 1.3205 and 1.3220 since. The drag in cable also weighed a little on the euro as it is lower against the dollar trading at 1.1574 at the moment near the lows as well.
Despite the improvement in risk sentiment, there was little movement of note in the aussie and kiwi as both currencies remain subdued in trading so far. AUD/USD moves in a range of 22 pips on the day and settles near unchanged levels at 0.7128 currently. It's a similar story for the NZD/USD as it trades in a 24 pips range and is a little closer to the lower end of that range at the moment at 0.6512.
But the slightly better risk tone in markets did help with weakness in the yen as it remains on the back foot as we approach the US session. USD/JPY moved to a high of 112.50 early in the session before giving back some of those gains as equities surrendered some of its earlier gains as well to settle close to 112.30 at the moment.
Looking at the session ahead, it's going to depend very much on risk sentiment still so the key will be to watch out for the performance US equities. The likely mover on the back of that will be yen pairs, so that will be the focus as we end the week.